Google Dives Into Hardware With $1.1B HTC Deal

Alphabet Inc. (GOOGL) subsidiary Google has signed a $1.1 billion cooperation agreement with Taiwanese smartphone manufacturer HTC in a bid to strengthen its emerging hardware business.

Google will pay $1.1 billion in exchange for a team of HTC's employees, the majority of which worked with the search engine giant on its Pixel smartphone, according to a statement issued by the two companies. Wired reports that around 2,000 staff will join Google as part of the agreement. Separately, the Mountain View, California-based company will obtain a non-exclusive license for some of the smartphone maker's intellectual property.

Google has been pursuing HTC, the company that helped it to develop Nexus tablets and Pixel smartphones, for a while now. The search engine giant was rumored to be in talks about acquiring the Taiwanese smartphone specialist, although in the end the deal, which is expected to close by early 2018, became a partnership. (See also: Google in 'Final Stages' of Negotiations to Buy HTC's Smartphone Biz: Report.)

The agreement appears to makes sense for Google as it provides the company with engineers to integrate Pixel hardware with its homegrown software without the headache of inheriting unwanted assets.

Google launched a hardware division last year and is particularly eager to develop software for artificial intelligence and virtual reality. Achieving those ambitions requires powerful phones, which is where HTC and its engineers could potentially come in handy.

In a blog post, Rick Osterloh, Google’s senior vice president of hardware, said the agreement can help the tech giant to innovate its family of Made by Google products, which currently include Pixel smartphones, Google Home, Google WiFi, Daydream View virtual reality headset and Chromecast Ultra.

Osterloh added that Google will unveil a second generation of products October 4. According to Wired, they will reportedly include two new phones, a smaller version of the Google Home and a high-end laptop. (See also: Alphabet Stock Is Setting up for a Major Breakdown.)

Meanwhile, HTC will continue to make its own smartphones and Vive VR products, adding in a statement that the deal with Google gives it greater financial flexibility to pursue its strategy. "This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and VIVE virtual reality businesses,” Cher Wang, chairwoman and CEO at HTC, said.